Foreign digital service suppliers with sales in Chile have to apply, collect and remit 19% VAT on certain digital services since June 1, 2020.
Affected foreign digital service companies now have VAT registration and collection obligations for their sales to Chile-based customers.
There is a simplified registration system for foreign digital service suppliers to use to fulfil their Chile VAT obligations. Here is the link to the Chile registration portal.
There is no sales threshold to registration meaning that Chile VAT obligations kick in from the foreign suppliers’ first sale to a Chile-based customer.
Affected digital services include (please note, this list is not exhaustive):
The end customer’s location in Chile is determined if two of the following four pieces of evidence match:
Chile had been reviewing its legislation relating to cross-border digital sales for some time. Back in June 2018, Chile’s then Finance Minister Felipe Larraín Bascuñán revealed his government's plans. “We are looking at other ways to apply tax, perhaps charge a transaction fee,” Larraín Bascuñán was quoted by Reuters. “Initial estimates suggest that collecting taxes from the digital economy and digital commerce could bring in several hundred million dollars.”
In August 2019, Chile's lower house of Congress (the Chamber of Deputies) set in train a major reform of the country's tax system. Included was a tax (of 19% VAT) on digital services rendered in Chile by non-residents.
A previous estimate from the Economic Commission for Latin America and the Caribbean (ECLAC) stated that such a rule change could raise USD$40 million annually for the Chilean government.
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